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External Limits of Capitalism

External Limits of Capitalism

Chapter:

(p.19)
Chapter 3 External Limits of Capitalism

Source:

The Limits of the Market

Author(s):

Paul De Grauwe

Publisher:

Oxford University Press

DOI:10.1093/acprof:oso/9780198784289.003.0003

The theme of this chapter is the discrepancy between individual and collective rationality which occurs when individuals do not take into account external effects of their individual decisions. In a market system individuals have no interest in considering external effects. The problem is felt in three domains. Firstly an uncontrolled market system leads to degradation of the environment, which increases as the market system expands. A public harm is therefore created and becomes increasingly important. Secondly, the expansion of the financial markets during an economic boom also leads to public harm, namely the instability of a more risky system from which no one can escape. Thirdly, paradoxically enough, the expansion of the market leads to a decrease in interest in public goods.

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a monograph in OSO for personal use (for details see www.oxfordscholarship.com/page/privacy-policy).date: 19 November 2018